Indiana court hears Duke Energy ice storm case

INDIANAPOLIS (AP) -- An attorney for Duke Energy Corp. urged the Indiana Court of Appeals on Monday to reverse a state regulatory panel's decision blocking the company's attempt to pass onto its customers the cost of damages it incurred during a 2009 ice storm.

Duke Energy attorney Jon Laramore said during oral arguments that the Indiana Utility Regulatory Commission's October 2011 order was an "arbitrary and capricious action."

That order came more than a year after the regulatory panel ruled in Duke Energy's favor in its initial request to pass onto its customers $11.6 million in power-outage repair costs following a January 2009 ice storm. Those costs would have been considered during the Charlotte, N.C.-based company's next rate case.

But the regulatory agency reversed itself after it reviewed the ice storm issue in the wake of an ethics case that followed Duke Energy's hiring of the panel's former chief counsel, Scott Storms.

Laramore told the three-judge court it was a "puzzling" about-face because the court made completely different rulings based on the same evidence.

"They came to polar opposite conclusions based on the same set of facts," he said.

However, Judge Nancy Vaidik pressed Laramore on that contention, noting that the commission's second order on the matter was based only on the ice storm case. In contrast, in its initial July 2010 decision, the panel had considered the impact of both a September 2008 windstorm and the ice storm that four months later left tens of thousands of southern Indiana residents without power for days.

Judge Paul Mathias noted other differences, including that the commission's staff was not the same one that that issued the first order.

David Steiner, an attorney for the commission, told the court that the utility panel had reviewed different information leading up to its second order, including new testimony in the case from a top Duke Energy executive.

"This was a completely new look at the evidence," Steiner said, adding that the decision was "fully supported by the law and the facts."

Storms, who had been both the commission's top attorney and its administrative law judge, was fired by Duke Energy in November 2010 after just two months on the job after it came to light that he discussed a position with Duke Energy while presiding over hearings concerning the company.

Gov. Mitch Daniels also ousted the utility commission's then-chairman, David Lott Hardy, saying he knew about Storms' ethical conflict but did nothing about it.

An internal audit by the commission found no evidence that Storms exerted "undue influence" on the panel's decisions. The storm damage case is the only one the panel reopened following the Storms ethics case.

At the time that ethics issue came to light, Duke Energy's ice storm costs case had been appealed by the Indiana Office of Utility Consumer Counselor, which argued that Duke Energy's request was excessive.

Vaidik said the court would consider Monday's arguments and rule on the matter "as soon as possible."